But for many consumers, plan offers modest benefits
WASHINGTON - The House passed a sweeping housing bill yesterday that President Bush could sign as early as this week; it would ease some of the market's problems but provide only modest benefits for homebuyers or borrowers facing foreclosure.
While the bill was widely praised by real estate groups, doubts remained about how much impact it will have for consumers.
"This isn't going to be the catalyst for a better housing market," said Mark Zandi, chief economist at Moody's Economy.com. "It may staunch some of the downturn, but it's going to have a very modest positive impact."
The highlights include $300 billion to provide more affordable mortgages to troubled homeowners, nearly $4 billion in grants to help communities fix up foreclosed properties, and a $7,500 tax credit for first-time buyers.
The tax break applies for those who purchase between April 9, 2008, and July 1, 2009. The full amount is only available for individuals with incomes under $75,000 or couples earning less than $150,000. Moreover, it will have to be paid back, interest-free, over 15 years.
Cash-strapped homeowners who are spending more than 31 percent of their income on their house payment may qualify for a new, more-affordable loan backed by the Federal Housing Administration under the bill.
Lenders, however, would have to agree to take a loss on the existing loans, and would walk away with at least some payoff. Lender participation is also voluntary.
In addition, homebuyers who purchase a property with an FHA loan will no longer be able to receive financial assistance from the sellers. The bill closes a loophole that let sellers channel money to buyers through charities.
While critics say defaults from these no-money-down loans are rising to such an extent that they threaten to put taxpayers on the hook, supporters say many borrowers with good credit but without enough money saved up for a down payment will be locked out of the market.
"That's going to cause a lot of people not to be able to buy a house," said Mike Davis, a realtor in West Des Moines, Iowa.
In a move to shore up mortgage finance companies Fannie Mae and Freddie Mac, the bill allows the government to buy stock in them and extends a line of credit to the companies.
Over the past week, investors fears about the health of Fannie and Freddie, which buy or guarantee about half of the nation's mortgage loans, have rippled through the market, causing a sharp rise in mortgage rates.
